Do you know what employment “at-will” means? Are you aware some European countries make it virtually impossible to terminate someone unless a company can prove there has been serious employee misconduct? Are you familiar with the labour laws of major emerging economies?
The laws pertaining to dismissal and severance can vary greatly from country to country. It’s important for HR professionals to understand these differences — you may have to discuss termination with colleagues in other countries (if your company is multinational) or assist newly arrived foreign employees unfamiliar with domestic policies and applicable laws.
The following is a summary of the laws of dismissal and severance in some of the world’s largest economies.
As a refresher, the general framework is as follows:
Statutory notice of termination: Employment standards legislation in each jurisdiction sets out the amount of minimum notice or pay in lieu of notice of termination that is required. In some cases, statutory severance pay is also required. Unless an employee is terminated “for cause,” statutory notice typically ranges from one to eight weeks’ written notice, based on length of service. Most jurisdictions require enhanced notice when an employer terminates or indefinitely lays off a certain number of employees (such as 50 or more) within a specified period.
Common law notice: In addition to employment standards requirements, non-union employees are entitled to a reasonable notice of termination under the common law, as determined in the courts. Such notice is often substantially more onerous than statutory minimums and depends on factors such as an employee’s age, position, length of service and salary.
An employee who has been terminated with notice, in accordance with the applicable employment standards legislation, can still sue an employer for more pay in lieu of notice. Court awards of one year or more are not unusual for senior management employees, with awards of up to 24 months for long-service, senior employees.
Employers and employees may enter into an enforceable employment contract for a defined entitlement on termination of employment that replaces the common law default of reasonable notice, provided such a contract provides for at least the minimum statutory entitlements.
The approach to severance south of the border is to leave it as an issue between the employer and employee. The general rule, absent an agreement to the contrary, is a contract for employment that does not have a fixed end date is “at will.” This means an employer can terminate an employee for any reason (or for no reason) without notice. Severance pay is allowed but is generally left to the parties to negotiate.
The strict contractual rule has been tempered in a number of ways, though the various exceptions depend on the applicable state and federal laws. Another way is through statute. Numerous laws prevent termination of employment based on discriminatory grounds such as sex and age. Some case law has also found there to be implied terms in employment contracts requiring an employer to act in good faith, though this is not consistent in all parts of the U.S.
In certain circumstances, a wrongful dismissal may give rise to an independent tort action if an employer’s conduct is considered to be egregious. As a result, seeking advice specific to the relevant jurisdiction is advisable.
Across the pond, the United Kingdom has a system that more closely reflects the Canadian experience. The law says either party can terminate employment upon due notice to the other side. However, the law requires an employee not be dismissed without cause. An employer must, therefore, follow a three-step process when terminating an employee for cause. It must issue written notice of the dismissal and the reasons, with a meeting to discuss the dismissal and the employee’s right to appeal and, finally, hold a meeting to discuss the employee’s decision regarding appeal.
An employee is entitled to both statutory severance pay and a period of notice based on her length of service. An employer that fails to give adequate notice can be required to compensate with pay in lieu thereof.
Redundancies, where employment is terminated for valid economic reasons, are permitted.
A long history of regulated working conditions has led to strict rules regarding severance in France. French law places a high burden on any employer that wishes to terminate an employee if the contract does not specify a fixed end date. The French labour code stipulates, in the absence of termination provisions in an employment contract, an employee can only be terminated for serious misconduct.
The process for termination includes a mandatory meeting with the employee where she is informed of the reasons for dismissal. She can be accompanied by an advisor of her choice and notice of termination must be sent by registered mail. Furthermore, an employer that intends to dismiss on economic grounds must first consult with staff delegates and notify the appropriate authority under the code.
The code also specifies minimum severance pay, which can be increased on mutual agreement by the parties.
German labour law is complex, with little uniformity in its application. In general, an employer must show cause for dismissal, with examples including misconduct or economic necessity. If there is a Works Council, an employer must inform it of the dismissal and provide reasons. The Works Council can also file an objection to the termination, which grants the employee certain rights of relief if she decides to bring a court action.
Specialized labour courts also exist in cases of disagreement between the parties.
Though employment law in many emerging economies is still developing (or non-existent), several larger economies have developed laws that regulate the law of dismissal and severance.
Brazil, for example, requires just cause for dismissal and notice between eight and 30 days, depending on the nature of the contract. Employees of 10 years or more are considered “tenured” and require two months’ wages to be paid as severance.
Private sector workers and employees in China must provide notice to their employers if they wish to quit. Chinese labour laws also prohibit terminations by employers for specific reasons such as illness. Disputes generally go to arbitration.
Like the U.S., the basic premise of Indian labour law is employers have the right to terminate employment unilaterally without reason. This traditional premise has been softened by requiring mandatory notice periods and making termination on discriminatory grounds illegal.
While labour and employment laws are many things, consistent does not appear to be one of them. Despite this frustrating reality, it is important HR professionals be aware of the key differences in the laws of various countries, to better serve employers, employees and clients.
George Waggott is a partner in the employment and labour law group at Lang Michener in Toronto. His practice includes advising employers on employment and labour law. Contact him directly at (416) 307-4221 or gwaggott@ langmichener.ca for further information.